United States v. Baker Funeral Home, Ltd.
196 F. Supp. 3d 530
E.D. Pa.2016Background
- Baker Funeral Home (originally Baker Funeral Home, Ltd.; later Baker Funeral Home, PC) repeatedly failed to file employment tax returns and pay payroll taxes since the 1990s; IRS collection efforts began in 1999 and liabilities grew into the hundreds of thousands/ millions.
- The Government obtained a consent Permanent Injunction (2012), an Amended Permanent Injunction (2012) expanding coverage to Baker PC, and a Consent Receivership Order (2014) appointing a Receiver to prepare returns, control tax accounts, and oversee compliance.
- Despite the Injunctions and Receivership, Baker Funeral Home, PC and Vince and Marcia Baker: filed multiple late or missing Form 941/940/1120S returns; failed to make required payroll deposits; refused or delayed providing records to the Receiver; and failed to pay Receiver and court-ordered attorney fees.
- The Receiver reported chronic accounting deficiencies (unmaintained QuickBooks, multiple accounts, commingled personal and corporate funds, missing pre-need contract records) and recommended termination of the Receivership.
- At an evidentiary hearing (June 15, 2016), the Court found clear and convincing evidence of noncompliance, rejected defenses of substantial compliance and impossibility, and concluded the Bakers and Baker PC are in civil contempt and are unlikely to comply with future tax obligations.
- The Court granted the Government’s Third Motion for Contempt, left sanctions and the expanded injunction’s terms for a later hearing, and maintained a pendente lite freeze on asset dissipation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bakers and Baker PC are in civil contempt of the Amended Permanent Injunction and the Consent Receivership Order | Bakers and Baker PC repeatedly violated clear court orders by filing late/missing returns, failing payroll deposits, obstructing the Receiver, and not paying ordered fees | Noncompliance was inadvertent or technical; levies and Mrs. Baker’s alleged conversion made compliance impossible; Mrs. Baker relinquished control | Court: Contempt proven by clear and convincing evidence; rejected substantial-compliance and impossibility defenses; contempt finding affirmed |
| Whether Mrs. Baker (not formally a named defendant) can be held in contempt | The Consent Receivership Order, signed by her in officer capacity, imposed duties; she had actual knowledge and is legally identified with Baker PC | She argued she was not a party individually and later relinquished access/control so cannot comply or be sanctioned | Court: She is bound by the signed Consent Order and may be held in contempt; her claimed relinquishment and lack of access were unproven and insufficient |
| Whether Receiver’s authority was obstructed and whether cooperation obligations were breached | Receiver had express rights of access and control under the Consent Order; Bakers delayed/refused production and failed to implement accounting controls | Bakers claimed they provided records, that levies impaired ability to pay, or that misdeeds by one spouse prevented compliance | Court: Baker family repeatedly failed to cooperate, delayed/failed document production, resisted implementing controls; obstruction of Receivership proven |
| Whether scope of injunction should be expanded (wind down business; bar Bakers from funeral business) | Government: Given recurrent violations and low likelihood of future compliance, broaden injunctive relief under 26 U.S.C. § 7402 to wind down operations and restrict Bakers from operating funeral businesses | Bakers: Argued inability/impracticality, some cooperation, and personal circumstances; disputed scope and necessity | Court: Using totality-of-circumstances standard, finds Bakers unlikely to comply in future and authorizes expansion of injunction; details and sanctions reserved for subsequent proceeding |
Key Cases Cited
- United States v. Juror No. One, 866 F. Supp. 2d 442 (E.D. Pa. 2011) (definition and scope of contempt)
- Taberer v. Armstrong World Indus., 954 F.2d 888 (3d Cir. 1992) (civil vs. criminal contempt analysis)
- Shillitani v. United States, 384 U.S. 364 (1966) (contempt proceeding classifications)
- McDonald’s Corp. v. Victory Inv., 727 F.2d 82 (3d Cir. 1984) (function of contempt and remedial vs punitive distinctions)
- Hicks ex rel. Feiock v. Feiock, 485 U.S. 624 (1988) (civil contempt coercive purpose vs. criminal punishment)
- United States v. Rylander, 460 U.S. 752 (1983) (impossibility defense to contempt; burden of production)
- Berne Corp. v. Government of the Virgin Islands, 570 F.3d 130 (3d Cir. 2009) (impossibility defense fails if condition is of the party’s own making)
- United States v. Local 560 (I.B.T.), 974 F.2d 315 (3d Cir. 1992) (standard for modifying injunctions when original purposes are unfulfilled)
- United States v. United Shoe Mach. Corp., 391 U.S. 244 (1968) (decree modification when decree fails to accomplish objectives)